Business conditions remained broadly unchanged last month when compared to December 2020 and far below levels recorded before the COVID-19 pandemic, a Central Bank analysis has shown. 

While the bank's business conditions index was marginally higher than than the value recorded in June 2020, it was well below January 2020 levels and continued to signal low levels of activity. 

This reflects weak conditions in the tourism sector, as well as lower economic sentiment and industrial production on a year earlier. 

Overall business conditions continued to be worse than those observed during 2009, highlighting the severity of the pandemic relative to the Global Financial Crisis.

Meanwhile, the European Commission’s Economic Sentiment Indicator improved marginally to 85.8 from 85.4 in January. 

Confidence rose within the services sector and, to a more limited extent, in the construction sector and among consumers. 

Fewer loans subject to moratoria

The monthly update also reported that the value of loans subject to a moratorium as of the end of December edged down to €748.7 million, equivalent to 6.4 per cent of related outstanding loans. 

Loan moratoria offers were introduced last year by banks to local residents and business owners, as part of efforts to limit the economic impact of pandemic-caused economic slowdown. 

The reduced overall value of loans subject to moratoria is a sign that some businesses and households have resumed their loan repayments, thus signaling a recovery in income flows. 

By the end of 2020, 537 facilities for working capital purposes had been granted under the Malta Development Bank COVID-19 Guarantee Scheme to businesses impacted by the pandemic, corresponding to total sanctioned amounts of €408.1 million, equivalent to more than half of the scheme’s target size.

COVID index

A Central Bank index used to track the government's response to the COVID-19 pandemic also reflected the growing importance of vaccination in the country's pandemic strategy. 

The COVID government response index stood at 64 at the end of January, up from 61.3 at the end of December. 

The index, which is based on an Oxford University-developed metric, is a composite indicator that summarises various containment, economic and health-related measures introduced in response to the pandemic. 

More stringent containment measures, higher economic aid or a strengthened health response to the pandemic result in higher scores. 

The higher score Malta registered on the index in January reflected vaccine rollout to people other than healthcare frontliners, the Central Bank noted. In January, vaccines became accessible to elderly people living in old people’s homes as well as to clinically vulnerable individuals. 

Malta's score of 64 was still lower than the euro area’s average score of 69.7, with many countries across the EU still enforcing stringent restrictions as a result of the pandemic. 

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